Editorial Staff

Study: Proposition 80 Would Give MA 2nd Highest Combined State & Federal Capital Gains Tax Rate in U.S.

/in , , , , /by Editorial Staff
Share on Facebook
Share on Twitter
Share on
LinkedIn
+

Read coverage of this report in the Boston Herald: “Study: ‘Millionaire’s tax’ would hurt state” and the Boston Business Journal: “‘Millionaires’ tax’ would make Mass. an outlier in capital gains tax, says group”

Unlike federal government, gains could move taxpayers into higher state bracket 

BOSTON – If voters approve Proposition 80, scheduled to appear on the statewide ballot next year, Massachusetts’ top capital gains tax rate would go from 30th highest in the nation to fourth and the commonwealth’s highest combined state and federal rate would move from 25th to second, according to a new Policy Brief published by Pioneer Institute.

Download “Back to Taxachusetts Series: Capital Gains”

“Proposition 80 would have an outsized impact on capital gains,” said Greg Sullivan, the author of “Back to Taxachusetts Series: Capital Gains.”  “And one of the few things most economists agree on is that keeping taxes on investment low is critical to economic growth, job creation, and rising wages.”

The ballot initiative would put an additional 4 percent surtax on any annual income over $1 million.

Passage of the initiative would introduce an important difference between federal and state treatment of capital gains taxes.  The Internal Revenue Service essentially treats capital gains as separate from income tax rates in that capital gains income can’t push a taxpayer into a higher tax bracket.

Under Proposition 80, the 4 percent surtax would apply to all annual income over $1 million, meaning that capital gains income could push a taxpayer into a higher state bracket.

Under Proposition 80, the top state capital gains tax rate would rise from 5.1 percent to 9.1 percent.  In terms of national ranking, it would move Massachusetts from having the 30th highest top rate to the fourth.

Massachusetts’ highest combined state and federal rate would rise from 28.1 percent to 32 percent (states use different methodologies for calculating capital gains taxes, so the combined rate can’t always be determined simply by adding the state and federal rates).  In terms of its national ranking, Massachusetts would go from 25th to second.

Passage of Proposition 80 would also give Massachusetts the sixth highest capital gains tax rate in the world, behind just Denmark, Finland, France, Ireland, and California.

About the Author

Gregory W. Sullivan is Pioneer’s Research Director. Prior to joining Pioneer, Sullivan served two five-year terms as Inspector General of the Commonwealth of Massachusetts, and was a 17-year member of the Massachusetts House of Representatives. Greg is a Certified Fraud Investigator, and holds degrees from Harvard College, The Kennedy School of Public Administration, and the Sloan School at MIT.

About Pioneer

Pioneer Institute is an independent, non-partisan, privately funded research organization that seeks to improve the quality of life in Massachusetts through civic discourse and intellectually rigorous, data-driven public policy solutions based on free market principles, individual liberty and responsibility, and the ideal of effective, limited and accountable government.

Get Updates on Our Economic Opportunity Research

Research on Economic Opportunity:

Six Years Later, Massachusetts Active Home Listings Remain 35% Below Pre-COVID Level

Our November edition of The House Call covers the dwindling availability of homes on the market in Massachusetts since 2019, even as many other states have seen full recoveries in the number of market listings after COVID. It discusses the implications of lower home availability for buyers and sellers alike and identifies a couple of major solutions.

New Pioneer Institute Analysis Finds Proposed Massachusetts Income-Tax Cut Unlikely to Cause Major State Revenue Decline

Lessons from the 2000 Massachusetts Income-Tax Rollback: A Reality-Check for the 2025 Ballot Debate is an empirical analysis of Massachusetts revenue data from FY1998–FY2021. The study concludes that a one-point rate reduction is unlikely to produce large, persistent revenue shortfalls, and that long-term fiscal stability depends far more on economic performance than on marginal rate differences.

Among Large Massachusetts Cities, Lawrence Had the Highest Home Value to Income Ratio in 2024

This edition of The House Call explores new American Community Survey data comparing home values and rents to household incomes in Massachusetts cities. It also discusses a proposed rezoning in Boston that would allow for taller buildings downtown.

Massachusetts’ Changing Demographic Landscape

This edition of Mapping Mass Migration features an analysis of recently released demographic estimates from the Census Bureau. Our analysis covers how Massachusetts' population has changed since the pandemic by race and age, discussing the state's shrinking youth population, its flat growth among prime-aged working demographics, its growing racial and ethnic diversity, and how it compares to other states. The newsletter concludes with a brief discussion of what implications these trends may have for the Bay State's future population growth.

Pioneer Institute Joins Pew Charitable Trusts in Call to Expand Housing Affordability

Pioneer Institute is pleased to join a statement of shared principles organized by the Pew Charitable Trusts in Washington, D.C., aimed at enhancing housing availability and affordability nationwide. 

Massachusetts’ Capital Investment Plan Earmarks $415 Million for Housing in FY2026

This edition of The House Call breaks down the housing items in Massachusetts' FY2026-FY2030 Capital Investment Plan. It also explains a new policy ordered by the Department of Public Utilities that would require natural gas customers to pay more for new hookups.

New Study Highlights Tax Reforms that Would Enhance Massachusetts’ Competitiveness

Research indicates that tax policy plays a key role in outmigration from Massachusetts, and a new study published by Pioneer Institute highlights six tax reforms that would help the Commonwealth address its outmigration and competitiveness challenges. 

Despite Statewide Legalization, Boston has a lot of Work to Do to Allow By-Right ADUs Within Its Borders

This edition of The House Call explains why the City of Boston is behind the curve on broadly allowing accessory dwelling units by right, and what it's doing to catch up. The newsletter also explores the (limited) housing options for seasonal workers on Cape Cod and how some employers are housing workers in company-owned buildings.

Pioneer Institute Joins Coalition of Business and Taxpayers to Support Affordability, Job and Economic Growth

Boston, MA — The two 2026 ballot proposals filed today—one to lower the state income tax from 5% to 4% over three years, and another to strengthen the state’s tax revenue cap (“62F”)—represent concrete steps to return billions to taxpayers and restore Massachusetts’ economic competitiveness. According to fiscal modeling by the Mass Opportunity Alliance (MOA), of which Pioneer Institute is a founding member, the income tax reduction alone would save the average taxpayer more than $1,300 annually.